2016 Fourth Quarter (Preliminary) Productivity and Costs

Historical release narrative reproduced from the official public-domain source. Statistical tables, standard technical appendices, administrative material and attendance rosters are omitted; formatting is adapted for reading. Figures retain the release's historical context and may have been revised. Consult the linked source for the complete document.

Fourth Quarter and Annual Averages 2016, Preliminary

Nonfarm business sector labor productivity increased at a 1.3-percent annual rate during the fourth quarter of 2016, the U.S. Bureau of Labor Statistics reported today, as output increased 2.2 percent and hours worked increased 0.9 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the fourth quarter of 2015 to the fourth quarter of 2016, productivity increased 1.0 percent, reflecting increases in output and hours worked of 2.2 percent and 1.1 percent, respectively. (See table A1.) Annual average productivity increased 0.2 percent from 2015 to 2016. (See table C1.)

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers.

Unit labor costs in the nonfarm business sector increased 1.7 percent in the fourth quarter of 2016, reflecting a 3.0-percent increase in hourly compensation and a 1.3-percent increase in productivity. Unit labor costs increased 1.9 percent over the last four quarters. (See tables A1 and 2.)

BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity. Increases in hourly compensation tend to increase unit labor costs, and increases in output per hour tend to reduce them.

Manufacturing sector labor productivity increased 0.7 percent in the fourth quarter of 2016, as output increased 0.8 percent and hours worked were unchanged. Output per hour increased 0.1 percent in the durable goods manufacturing sector and 1.8 percent in the nondurable goods sector. Over the last four quarters, manufacturing sector productivity increased 0.4 percent, output increased 0.2 percent, and hours worked decreased 0.2 percent. (See tables A1, 3, 4, and 5.) Unit labor costs in manufacturing increased 3.3 percent in the fourth quarter of 2016 and rose 2.2 percent from the same quarter a year ago. Hourly compensation increased 4.1 percent in the fourth quarter of 2016.

The concepts, sources, and methods used for the manufacturing output series differ from those used in the business and nonfarm business output series; these output measures are not directly comparable. See the Technical Notes for a more detailed explanation.

Annual averages

Unit labor costs in the nonfarm business sector rose 2.6 percent in 2016, reflecting increases of 2.8 percent in hourly compensation and 0.2 percent in productivity. The increase in unit labor costs is the largest since 2007, when unit labor costs rose 2.7 percent. Real hourly compensation, which takes into account changes in consumer prices, increased 1.5 percent in 2016.

In the manufacturing sector, productivity increased 0.6 percent in 2016, as output increased 0.2 percent and hours worked decreased 0.4 percent. The decrease in the annual hours series was the first since a 12.9-percent annual decrease in 2009. Manufacturing sector productivity has increased at an annual rate of less than 1.0 percent in each of the last 4 years. The average annual rate of manufacturing productivity growth from 2007 to 2016 is 1.7 percent, which is below the long-term rate from 1987 to 2016 of 3.2 percent. Unit labor costs increased 2.6 percent in 2016.

Revised measures

Revised and previously published measures for the third quarter of 2016 are shown in tables A2 and B1 and cover the following major sectors: nonfarm business, business, manufacturing, and nonfinancial corporations.

In the third quarter of 2016, nonfarm business productivity was revised up 0.4 percentage point, to an increase of 3.5 percent. (See table B1.) Unit labor costs in the nonfarm business sector increased 0.2 percent in the third quarter--rather than 0.7 percent as previously reported.

In the manufacturing sector, productivity was revised down 0.4 percentage point to show no change in the third quarter of 2016. Manufacturing unit labor costs increased 3.3 percent, the same rate as previously reported.

In the nonfinancial corporate sector, productivity was revised down 0.6 percentage point in the third quarter of 2016, to an increase of 6.5 percent. This downward revision to productivity is due primarily to a 0.5-percentage point downward revision to output. (See table A2.) This release incorporates revised historical source data on output in nonfinancial corporations, published December 22, 2016 by the Bureau of Economic Analysis. This led to revisions back to 1947 for all quarterly and annual output-related measures including productivity and unit labor costs. The average annual rate of productivity growth from 2007 to 2015 in the nonfinancial corporate sector was revised down from 1.3 percent to 0.9 percent. The long-term rate for average annual productivity growth from 1947 to 2015 was revised down 0.1 percentage point to 2.2 percent.

Quarterly and annual data for all sectors from 2014 to 2016 appear in tables 1-6. Historical annual indexes for the nonfinancial corporate sector can be found in appendix table 1. Full historical measures can be found on the Productivity and Costs home page: www.bls.gov/lpc/#data.

Methodology change for hours worked

Beginning with the Productivity and Costs news release scheduled for March 8, 2017, an improvement in the methodology for estimating hours worked will be implemented. As a result, hours worked and related measures, including labor productivity, will be subject to revision for all sectors from 1989 forward. For more information see: www.bls.gov/lpc/hwhpnew.htm.

Calendar year 2017 release dates for Productivity and Costs news releases are now available at www.bls.gov/schedule/news_release/prod2.htm.

Durable Previous quarter 0.1 0.7 0.7 3.9 0.4 3.8 Manufacturing A year ago 1.1 0.8 -0.2 2.7 0.9 1.6